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Mandated benefits, employment, and inequality in a dual economy (Inglês)

This paper studies the effect of enforcing labor regulation in an economy with a dual labor market. The analysis uses data from Brazil, a country with a large informal sector and strict labor law, where enforcement affects mainly the degree of compliance with mandated benefits (severance pay and health and safety conditions) in the formal sector, and the registration of informal workers. The authors find that stricter enforcement leads to higher unemployment but lower income inequality. They also show that, at the top of the formal wage distribution, workers bear the cost of mandated benefits by receiving lower wages. Wage rigidity (due, say, to the minimum wage) prevents this downward adjustment at the bottom of the income distribution. As a result, formal sector jobs at the bottom of the wage distribution become more attractive, inducing the low-skilled self-employed to search for formal jobs.

Detalhes

  • Autor

    Almeida,Rita Kullberg, Amaro Da Costa Luz Carneiro,Pedro Manuel

  • Data do documento

    2009/11/01

  • TIpo de documento

    Documento de trabalho sobre pesquisa de políticas

  • No. do relatório

    WPS5119

  • Nº do volume

    1

  • Total Volume(s)

    1

  • País

    Mundo,

  • Região

    Regiões Mundiais,

  • Data de divulgação

    2010/07/01

  • Disclosure Status

    Disclosed

  • Nome do documento

    Mandated benefits, employment, and inequality in a dual economy

  • Palavras-chave

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